Posted on Monday, October 2nd, 2017 in by Matt Garmony
The Perth property market is currently experiencing subdued conditions across most market sectors with our analysis indicating that it is unlikely there will be no growth in the short to medium term. Reports from the Real Estate Institute of Western Australia (REIWA) as at 18 September 2017 indicate a continued decline in the medium house price for Perth homes and Perth unit sales. REIWA’s data reveals Perth Property Market’s medium house price has dropped from $549,000 in the June quarter of 2015 to $510,000 in the June quarter of 2017 representing a 7.1% drop over the last three years. Similarly Perth Property Market’s medium unit price has decreased from $430,000 in June 2015 down to $407,000 in June 2017 indicating a 5.35% drop over the three year period. Sales volumes have been hovering around the 5,500 to 6,000 sales per a quarter with the number of properties listed for sale dropping a little over 1,000 properties to 13,262 which is still slightly above the long term equilibrium of 12,000 to 12,500 properties on the market at any given time. Similarly properties listed for rent have declined by a little under 1,000 to 9,792 however the vacancy rate is still a 6.9% and the medium rental is $350 per a week. This data would suggest we are at or close to the bottom of the market cycle.
The Australian Newspaper has recently reported the apartments purchased off the plan in Brisbane are now selling at losses of up to 36% which supports the Reserve Banks concern of Brisbane’s potentially over supplied high rise apartment market. The Australian further reported that the ANZ Bank had “red flagged 11 postcodes in Brisbane and Perth where lending for apartments will be tightened” and “the amount borrowed will be capped at 80% of the value of an apartment.” The Australian further reported the ANZ lists of postcodes included 7 in Perth such as the CBD, East and South Perth amongst others. Garmony Property Consultants market analysis has indicated the volume of supply of new apartments within the Perth Property Market metro area has had a detrimental affect on the value of established units. It is therefore likely that the other major lenders will follow ANZ soon in regards to the lending restrictions.
The tightening of lending restrictions will be further impacted by the easing of property total returns with Corelogic reporting a low 1.1% return for houses in Perth and 0.9% return for units. Recent data from Moody Investment Services states “mortgage delinquencies are at a 5 year high with WA delinquent loans rising by 0.5% points to 2.38% in July as the states seasonally adjusted unemployment rate rose from 5.4% to 5.9 in August.” Moody’s Vice President and Senior Analyst Alena Chen stated “the mining downturn has dampened economic growth in resource reliant states, such as Western Australia, the Northern Territory and Queensland and we expect this situation will way on Mortgage performance for some time.”
The RBA Govern Philip Lowe recently stated he will “not be rushed rising interest rates by actions of overseas central banks to avoid putting too much pressure on household shouldering record debt levels.” He further conveyed “higher levels of debt meant that household spending could be quite sensitive to increases in interest rates, something the Reserve Bank will be paying close attention to.” The Australian Newspaper reported “the ANZ and the National Australia Bank have bought forward the predictions of when the RBA will start lifting rates and are forecasting two rate rises this year.” Contrary to the above, the Westpac chief economist Bill Evans believes the RBA will be forced to keep rates steady throughout next year and will be dependent on whose economic forecast were right with Westpac predicting a 2.5% growth against the Reserve Banks 3.25%.
Further concerns for the Australian economy were revealed last week when the price of iron ore slipped to one month low down 3.5% to $70.90 US which is on the back of recent Chinese data including the slowing of retail sales, industrial production and fixed asset investment data.
Given the above we are of the opinion that the residential and the commercial/industrial Perth property market will remain flat for the short to medium term with no apparent prospects on economic growth to cause an increase in population growth. A report by Bankwest Curtin Economic Centre revealed 40,077 people left the state of Western Australia last year and a 29,253 moved west from other states and territories indicating an overall loss of around 11,000 people. Job seekers are moving east for more and better opportunities than are available in Perth.
For accurate updates on the market value of your property assets, contact the licensed valuers at Garmony Property Consultants for your property valuation needs and advice on the Perth Property Market.